Deal Would Give Chase A Foothold

Purchase Would Give Chase Foothold In Connecticut

In winning the bid to buy two ailing Bridgeport-based banks, Chase Manhattan Corp. would be the new kid on the banking block in Connecticut.

And it's an awfully big kid.

The third-largest banking company in the nation, New York-based Chase reported assets of $98.5 billion at the end of June.

The two Bridgeport-based banks Chase is expected to auire today -- Citytrust and Mechanics and Farmers Savings bank -- have combined assets of about $3.3 billion.

Most banking experts agree that Chase is financially healthy but not without its troubles. Entering the lucrative Fairfield County market would be a natural extension of its retail franchise in New York's adjacent Westchester County and in New York City.

But analysts also expect Chase would do some streamlining in Connecticut, possibly by cutting staff or closing branches, among other measures.

"It makes sense for Chase to be in Fairfield County," said John D. Rooney Jr., a bank analyst at Legg Mason Wood Walker in New Haven. "You go in there with no additional marketing or advertising costs ... It's going be a plus for them."

Rooney and others noted that Chase has the advantage of having close ties to Fairfield County, partially through newspapers and broadcast media in that area, and also because many residents of those suburbs commute to New York City.

If the auisition goes through, it will bring a major New York money center bank into Connecticut to compete directly with local and regional banks. But some analysts note that Chase has troubles not unlike the problems of some Connecticut banks -- notably bad commercial real estate loans.

Despite Chase's problems, Warren Heller, director of research at Veribanc Inc., a bank-research company in Wakefield, Mass., did not think it would be difficult for Chase to absorb the two Bridgeport banks.

"For a $100 billion institution to absorb [$3 billion] is nothing," Heller said. "They can absorb Citytrust and Mechanics kind of as an independent project."

Chase Manhattan Corp. owns New York-based Chase Manhattan Bank and operates more than 300 branches in New York state. The company also has regional banking offices in Arizona, Maryland and Ohio.

The company reported its shareholders' capital was 5.09 billion -- about 5 percent of total assets -- as of June 30. One analyst described the company's capital ratio -- a key measure of a bank's health -- as "respectable, better than some."

After large losses in 1989 and 1990, the banking company reported net earnings in 1991. In the second quarter of 1991, Chase said it earned $132 million, compared with $52 million in the same period a year earlier. Those earnings surpassed the expectations of some analysts.

A $350 million restructuring charge, which is projected to save $300 million this year, hurt the company's earnings in 1990.

Among the company's strengths are its credit card operations, experts say.

A Standard & Poor's report in March cited the company's "strong consumer credit business," saying that Chase Manhattan Bank was the second-largest credit card bank in the United States.

The second-quarter results this year reflect the company's sale of its investment management subsidiary for a gain of $98 million, as well as its sale of several business entities, including retail operations in Spain and Australia, the company said.

Stephen Berman, a bank analyst with County NatWest USA in New York City, described Chase as "healthy but with problems."

"Chase is a well-run professional bank. It's a world-class bank," he said. "They have also had their share of problems. In some ways you might say they have a world-class share of problems in terms of commercial real estate in the U.S. They're not alone ... They're working through them. It's difficult."

In recent years, Berman said, Chase has been developing a regional banking franchise. It targets consumer banking and small businesses, he said. And that is why it found Connecticut inviting.

"They're looking for an opportunity to fill out that retail banking franchise," Berman said.

Thomas Brown, a bank analyst with Donaldson Lufkin & Jenrette in New York City, said it was hard to gauge what Chase would gain from auiring the two Bridgeport banks because "we don't know exactly know what the terms of the deal are."

But he disagreed with Berman in assessing Chase's retail operations. "I wouldn't overemphasize what they bring to the party," he said. "As a money center bank, their strengths have not been in retail banking." Brown said a company such as Fleet/Norstar Financial Group "is more effective competition than Chase because their business has historically been retail and small-business banking."

Lewis Mandell, a professor of finance at the University of Connecticut and a former banking regulator, described Chase as a "very well-run bank."

"I think their strengths are just the fact that they are very solid across all areas," said Mandell, who has worked as a consultant for Chase. "They're not innovative and risk-takers like Citibank. But everything they do is just done with exactitude."

He said the company's expanding retail business represents a sound strategic move.

"I think all of the New York banks that intend to be one of the 10 survivors cannot afford to concentrate on a single line of